China, Australia seal landmark free trade agreement

A LANDMARK free trade agreement has been finalised between Australia and China, slashing tariffs on 95 per cent of goods and unlocking billions of dollars of exports.

The Chinese-Australia Free Trade Agreement (ChAFTA) was revealed by Trade Minister Andrew Robb this afternoon, in what has been hailed as an â€œhistoric dayâ€ for the country.

Mr Robb said the deal concluded a â€œpowerful trifectaâ€ of trade agreements after the government finalised agreements with Japan and Korea earlier this year.

FTA: The key industries affected

The three countries receive 61 per cent of Australiaâ€™s exported goods, and account for 52 per cent of all of Australiaâ€™s goods and service exports.

â€œI do think it is going to provide the impetus for taking our relationship within the Asian region, particularly the north Asian region, to a whole new level,â€ he said.

â€œIt will not only impact directly on goods and services trade, but have a very material impact on investment,â€ he said.

â€œBut also I think, the intangibles, it builds trust, it builds more confidence, it builds relationships and it is a contributor to a much wider cultural engagement and just greater stability and peace in the region.â€

Under the agreement, which has been almost a decade in the making, Australian farmers and dairy processors will get at least the access negotiated by their New Zealand counterparts.

All tariffs will be abolished for Australiaâ€™s $13 billion dairy industry, and beef and sheep farmers will also benefit from the abolition of tariffs ranging from 12-25 per cent.

â€œIn agriculture itâ€™s in every respect New Zealand-equivalent ... in dairy itâ€™s New Zealand-plus,â€ he said.

Tariffs on horticulture, seafood and live animal exports will be eliminated, while wine makers will also secure tariff abolition of between 14-30 per cent within four years.

Wool producers have also won greater access, with the ability to export another 30,000 tonnes of clean wool allowed on top of existing quotas.

The resources and energy sector has also benefited with tariffs on coking coal and aluminium oxide to be abolished on the first day of the agreement.

Cotton, wheat, sugar, rice and oilseed industries have missed out on any tariff relief.

The government said it had secured the â€œbest everâ€ agreement for market access for the services sector, including legal services, financial services, telecommunications and aged care services.

In a win for China, the Foreign Investment Review Board screening threshold will be lifted from $248 million to $1.078 billion.

Chinese companies building infrastructure projects worth more than $150 million in Australia will be able to access foreign labour under the countryâ€™s 457 visa scheme.

Unions have warned against easing workforce restrictions saying the move may allow Australian working conditions to be undermined.

But Trade Minister Andrew Robb said the Investment Facilitation Agreements would ensure Chinese-owned companies complied with Australian employment laws, including wages and conditions.

In addition to skilled workers having easier access to Chinese projects, a new Work and Holiday program will be established giving 5000 Chinese visitors a year the right to work.

Guaranteed access will also be granted to Chinese employees transferring within companies and â€œindependent executivesâ€ to work in Australia for up to four years.

Prime Minister Tony Abbott and Chinese President Xi Jinping will this evening witness the signing of multiple memoranda of understanding to bring the agreement into effect, including a declaration of intent to conclude the trade deal in 2015.

Mr Xi told parliament that Chinaâ€™s population of 1.3 billion created a market of â€œimmense potentialâ€.

â€œIn the next five years, China will import more than US$10 trillion of goods. Its outbound investment will exceed $500 billion.

â€œChinese tourists will make over 500 million overseas visits. All of this will provide a bigger market, more capital and more opportunities for the wider world.â€

A joint statement from Opposition Leader Bill Shorten and opposition trade spokeswoman Penny Wong said Labor supported the finalisation of negotiations on the agreement.

â€œLabor supports freeing up global trade because it drives growth, generates jobs, improves living standards and reduces poverty, both at home and abroad,â€ the statement said.

He called on the government to release the full text of the agreement for public scrutiny.

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I like this one "In addition to skilled workers having easier access to Chinese projects, a new Work and Holiday program will be established giving 5000 Chinese visitors a year the right to work."

China trade deal: opposition and unions voice concern about labour provisions
Labor indicates it cannot reach a position on legislation until full text of the agreement is released

Labor and unions have raised strong concerns about provisions in the China free trade agreement that could allow workers to come to Australia without evidence of local labour shortages.

But it is unclear whether the concerns are sufficient for Labor to consider voting against the enabling legislation, with the opposition indicating it cannot reach a position until the full text of the deal is released.

Under the terms announced on Monday, Australia â€œwill provide guaranteed access to Chinese citizensâ€ for a number of categories including â€œcontractual service suppliers for up to four yearsâ€.

The only limit cited in the government fact sheet is a cap of 1,800 people a year in four occupations: Chinese chefs, WuShu martial arts coaches, traditional Chinese medicine and Mandarin language tutors, subject to meeting standard immigration requirements.

Asked whether there would be uncapped access for other types of â€œcontractual service suppliersâ€, a spokesman for the trade minister, Andrew Robb, confirmed the cap applied only to those four occupations.

Australia has also offered guaranteed access to Chinese citizens who are â€œinstallers and servicers for up to three monthsâ€ and â€œbusiness visitorsâ€ for three to six months. Access would be granted for up to to four years for executives, managers and specialists.

Laborâ€™s trade spokeswoman, Penny Wong, asked during Senate question time on Tuesday whether employers would be required to undertake labour market testing before they were able to employ Chinese contractors under the agreement. Labour market testing requires companies to prove they had first tried to find suitable local workers.

The leader of the government in the Senate, Eric Abetz, said employers would be â€œexpected to demonstrate an ongoing labour market need before being able to sponsor overseas workersâ€.

Abetz also defended â€œinvestment facilitation arrangementsâ€ which would allow Chinese-owned companies registered in Australia undertaking infrastructure projects worth more than $150m to negotiate to allow the hiring of overseas workers.

He said the companies would be required to pay Australian market wage rates and adhere to Australian conditions and employment laws.

The governmentâ€™s fact sheet says the deals would be done on a case-by-case basis under arrangements similar to former enterprise migration agreements. Those EMAS were available to resources projects of more than $2bn in capital spending and more than 1,500 workers at their peak.

Wong said the public required more detail than was contained in the governmentâ€™s â€œglossy pamphletsâ€ and would not be drawn on the possibility of voting against the associated legislation.

But the senator said the proposed agreement had â€œthe potential to drive economic growth and create and support Australian jobsâ€.

The Greens criticised the inclusion of investor-state dispute settlement clauses, a mechanism that also causes concern within the Labor caucus.

The Greens senator Peter Whish-Wilson said ISDS clauses were â€œdangerous and undemocraticâ€ and would give Chinese investors â€œspecial rights to sue future Australian governments for changes to policy or legislation that impact their interestsâ€.

The attorney general, George Brandis, replied that dispute resolution mechanisms were â€œa commonplace and indeed a necessary element of any trade treatyâ€.

Robbâ€™s office said the ISDS in the China-Australia agreement would include explicit safeguards in areas such as health and the environment.

China has pledged to remove barriers to Australian exports of farm produce including dairy, beef, sheep and wine over time and has opened the way for greater access for Australian services businesses.

The government has argued the agreement is a good deal for Australia, saying more than 85% of Australian goods exported to China will be tariff-free as soon as the agreement comes into force, rising to 95% in 10 years. It is understood about 70% of goods are tariff-free at present.

(Reuters) - A trade deal signed with great fanfare between China and Australia has been touted as a major step towards Australia shifting its economy from a "mining boom" to a "dining boom," but the reality is likely to be more sobering.
Australia is looking to replace its reliance on exports of minerals such as coal and iron ore as mining investment wanes and demand begins to dwindle. The government would prefer to expand its food and agricultural exports to capitalize on a rapidly growing Asian middle class.

It has high hopes for the proposal for a free trade agreement (FTA) signed on Monday by Prime Minister Tony Abbott and Chinese President Xi, but the more likely winner from the deal is the services sector.

The deal is designed to open up Chinese markets to Australian farm exporters and the services sector, while easing curbs on Chinese investment in Australia. China is already Australia's top trading partner, with two-way trade of around A$150 billion ($130 billion) in 2013.

Several major agricultural foodstuffs, including sugar, rice and cotton, are currently excluded from the FTA, and Australia's frequent severe droughts impose a natural production ceiling on those sectors that are part of the pact.

Experts are waiting for the full text of the pact, which Australia called the best ever between Beijing and a Western country, warning the devil may yet be in the detail.

"Labor is deeply concerned that key export sectors like sugar have been told to expect nothing from the deal," said opposition Labor Party leader Penny Wong. "Mr Abbott has talked about a two-step FTA. The fact is Australia can't afford a second-rate FTA with China."

EXCLUSIONS

HSBC chief economist Paul Bloxham said the deal would support Australia's "great rebalancing act", but others warned the agricultural sector is comparatively tiny.

Of Australia's total exports to China of A$94.7 billion in 2013, iron ore accounted for A$52.7 billion, according to the Department of Foreign Affairs and Trade. Wool, the top agricultural export, made up just A$1.9 billion.

Boosting agriculture also requires big investment in isolated, dry and volatile areas with limited water supply. Large swathes of eastern Australia are currently in drought.

Australian farms' return on capital has seldom topped 2 percent in a year on average during the past decade, excluding changes in land values, according to government research bureau ABARES. The unpredictability of earnings is greater than in the United States, Africa and Brazil.

Meanwhile, the sugar, rice, wheat and cotton sectors will have to wait three years for a review of their tariffs. Even then, any changes are likely to be contingent on Australia relaxing its existing requirement that all investment proposals by Chinese state-owned entities be scrutinized by the Foreign Investment Review Board.

"In this day and age, sugar being excluded in what looks like a political trade-off is an absolutely unacceptable outcome," said Paul Schembri, chairman of industry group Canegrowers.

FALTERING DEMAND

At the other end of the deal, China faces a supply glut as economic growth falters. Inventories of iron ore, coal and cotton are bulging at ports across the country and state granaries are overflowing. The Australian dairy industry's hopes of a "white gold" rush have been dashed.
Businesses last week complained about Beijing's response, using non-tariff barriers from customs clearance to quality restrictions, which would skirt the FTA, to curb raw material imports.

The financial sector is also cautious, noting the dominance of its Asian peers in China. That means Australian businesses will probably dabble in niche projects, rather than trying to compete in core banking services.

Andrew Whitford, Westpac Banking Corp's (WBC.AX) head of Greater China, said it was still early days, and Westpac was "certainly not going to be opening more branches."

AGEING POPULATION

One sector where the road seems clearer is healthcare.

Chinese per capita health spending is growing the fastest in Asia, having quadrupled to $321 a year in 2012 from $80 in 2005, according to the World Bank.

China wants to shift to a community-based health system, as opposed to hospital-based, to cut costs and ensure universal access, leaving it with a shortage of providers in out-of-hospital health sectors like aged care and pharmacy.

An advanced aged care industry is "one of Australia's great comparative advantages", said Business Council of Australia CEO Jennifer Westacott.

Peter Hope, who runs a pharmacy in the small Australian state of Tasmania, said the new rules would allow him to quickly expand beyond his already planned Beijing store in April next year to 1,000 franchises around China.

(Reuters) - A trade deal signed with great fanfare between China and Australia has been touted as a major step towards Australia shifting its economy from a "mining boom" to a "dining boom," but the reality is likely to be more sobering.
Australia is looking to replace its reliance on exports of minerals such as coal and iron ore as mining investment wanes and demand begins to dwindle. The government would prefer to expand its food and agricultural exports to capitalize on a rapidly growing Asian middle class.

It has high hopes for the proposal for a free trade agreement (FTA) signed on Monday by Prime Minister Tony Abbott and Chinese President Xi, but the more likely winner from the deal is the services sector.

The deal is designed to open up Chinese markets to Australian farm exporters and the services sector, while easing curbs on Chinese investment in Australia. China is already Australia's top trading partner, with two-way trade of around A$150 billion ($130 billion) in 2013.

Several major agricultural foodstuffs, including sugar, rice and cotton, are currently excluded from the FTA, and Australia's frequent severe droughts impose a natural production ceiling on those sectors that are part of the pact.

Experts are waiting for the full text of the pact, which Australia called the best ever between Beijing and a Western country, warning the devil may yet be in the detail.

"Labor is deeply concerned that key export sectors like sugar have been told to expect nothing from the deal," said opposition Labor Party leader Penny Wong. "Mr Abbott has talked about a two-step FTA. The fact is Australia can't afford a second-rate FTA with China."

EXCLUSIONS

HSBC chief economist Paul Bloxham said the deal would support Australia's "great rebalancing act", but others warned the agricultural sector is comparatively tiny.

Of Australia's total exports to China of A$94.7 billion in 2013, iron ore accounted for A$52.7 billion, according to the Department of Foreign Affairs and Trade. Wool, the top agricultural export, made up just A$1.9 billion.

Boosting agriculture also requires big investment in isolated, dry and volatile areas with limited water supply. Large swathes of eastern Australia are currently in drought.

Australian farms' return on capital has seldom topped 2 percent in a year on average during the past decade, excluding changes in land values, according to government research bureau ABARES. The unpredictability of earnings is greater than in the United States, Africa and Brazil.

Meanwhile, the sugar, rice, wheat and cotton sectors will have to wait three years for a review of their tariffs. Even then, any changes are likely to be contingent on Australia relaxing its existing requirement that all investment proposals by Chinese state-owned entities be scrutinized by the Foreign Investment Review Board.

"In this day and age, sugar being excluded in what looks like a political trade-off is an absolutely unacceptable outcome," said Paul Schembri, chairman of industry group Canegrowers.

FALTERING DEMAND

At the other end of the deal, China faces a supply glut as economic growth falters. Inventories of iron ore, coal and cotton are bulging at ports across the country and state granaries are overflowing. The Australian dairy industry's hopes of a "white gold" rush have been dashed.
Businesses last week complained about Beijing's response, using non-tariff barriers from customs clearance to quality restrictions, which would skirt the FTA, to curb raw material imports.

The financial sector is also cautious, noting the dominance of its Asian peers in China. That means Australian businesses will probably dabble in niche projects, rather than trying to compete in core banking services.

Andrew Whitford, Westpac Banking Corp's (WBC.AX) head of Greater China, said it was still early days, and Westpac was "certainly not going to be opening more branches."

AGEING POPULATION

One sector where the road seems clearer is healthcare.

Chinese per capita health spending is growing the fastest in Asia, having quadrupled to $321 a year in 2012 from $80 in 2005, according to the World Bank.

China wants to shift to a community-based health system, as opposed to hospital-based, to cut costs and ensure universal access, leaving it with a shortage of providers in out-of-hospital health sectors like aged care and pharmacy.

An advanced aged care industry is "one of Australia's great comparative advantages", said Business Council of Australia CEO Jennifer Westacott.

Peter Hope, who runs a pharmacy in the small Australian state of Tasmania, said the new rules would allow him to quickly expand beyond his already planned Beijing store in April next year to 1,000 franchises around China.